The National Planning Commission released their National Development Plan (NDP) – Vision for 2030, on Friday.
The document is an unwieldy 444 pages long, although an overview is scheduled to be released by 18 November. The document is unnecessary verbose, which tends to dilute the potential impact, and this probably also limits its accessibility. The “summary of the plan” section is poorly constructed and not all that useful in highlighting crucial aspects of the plan.
The document contains fairly detailed discussions on a range of key topics including employment, infrastructure, foreign trade, education, health, social protection and safety. It makes a token attempt to link-up with Minister Patel’s National Growth Path (released in October 2010), but there are a number of key differences and some obvious contradictions.
The NDP contains little detailed discussion on fiscal and monetary policy. There is also little or no discussion around the affordability of the initiatives suggested, and in particular what this would all mean for taxes. There are also the usual ‘wish list’ of suggestions, with no real substantiation about how they could be achieved – for example SA must increase its savings rate.
The growth targets are extremely ambitious, but if achieved would transform the country.
Overall, despite its shortcomings, the NDP contains a number of vital, useful and broad-ranging suggestions, which if implemented, would provide a welcome boost to economic growth and job creation. It contains some refreshingly honest comments about the failure of the state and is also a fairly practical assessment of the type of initiatives that would help the South African economy develop and grow.
The NDP proposes creating 11 million jobs by 2030, which should reduce the unemployment rate to 14% by 2020 and to 6% by 2030. Total employment should rise from 13 million to 24 million by 2030. The proportion of adults working would then increase from 41% to 61%.
GDP should increase by 2.7 times in real terms between now and 2030, requiring average annual GDP growth of 5.4% over the period. GDP per capita should increase from about R50 000 per person in 2010 to R110 000 in 2030 in constant prices.
Export volume should grow by 6% a year to 2030 and the rate of savings should rise from 15% of GDP to 25% of GDP. The level of gross fixed capital formation should rise from 17% to 30%, with public sector gross fixed capital formation reaching 10% of GDP by 2030.
The plan to achieve these targets includes:
- a focus on increasing exports (focusing on those areas where SA already has the endowments and comparative advantage – mining, construction, mid-skill manufacturing, agriculture, agro-processing, tourism and business services);
- building the linkages between export earnings and job creation, which often occur in domestically focused small and medium sized firms, most often in the services sector;
- increasing the size and effectiveness of the innovation system;
- supporting small business;
- reducing the regulatory burden in sectors where the private sector is the main investor;
- improving the quality of education and the skills base;
- improving water, transport and energy infrastructure;
- providing greater policy and regulatory certainty to investors;
- improving the functioning of the labour market;
- reforming the public health system;
- providing better safety and security for all citizens;
- more reliable and affordable public transport;
- better housing development (including a better urban planning approval process);
- increased rural development; and
- an effective welfare service.
There is also a focus on fighting corruption and reforming the public service – the NDP makes the point that a “capable state is an essential precondition for South Africa’s development”.
The NDP supports the idea of a tax subsidy to employers to reduce the initial cost of hiring young labour market entrants as well as the adoption of a more open immigration approach to expand supply of high-level skills. There is also a proposal to simplify dismissal procedures for performance or misconduct as well as a better handling of probationary periods.
There is, fortunately, no naive belief that a weaker exchange rate is the panacea to South Africa’s economic success and the NPD points-out that “South Africa’s present economic capabilities do not allow greater control over the exchange rate, although reducing the volatility is a critical challenge that requires attention”.
The document provides significant detail on all these (and more) areas of development/suggestion. In particular, the focus on improving infrastructure is very useful, and we will provide further analysis over the coming days. The other key areas of the plan will be discussed in the coming weeks.